Meeting of Cook County Health and Hospitals System Finance Committee February 20, 2015

The entire committee attended the meeting: Chair Lewis M. Collens and Directors Jerry Butler, Ric Estrada and Ada Mary Gugenheim in person; Board Chair M. Hill Hammock, Director Dorene P. Wiese and non-Director Committee member Steven Scheer by phone.

Two public commenters pointed out that contracts slated for extension as part of the committee agenda were exceptionally expensive–for instance, the McKesson company is paid $13 million to collect $32 million in accounts receivable, a rake-off of nearly 40%, while the industry standard is between 4% and 7.5%. Procurement Chief Doug Elwell explained that these interim contracts would last only until May 31 while the System prepared to bring their functions in-house; Chair Collens added that the contracts were arranged four years ago, before there was an independent Hospitals board, and would not be approved today.

Several directors pressed Elwell about whether it would be possible to do the necessary hiring before the end of May, given that filling single vacancies takes nearly six months. Elwell acknowledged that the timetable was ambitious but noted it’s easier to fill 50 identical new positions (which can all be posted at once) than to refill 50 vacancies. He also acknowledged that bringing accounts receivable and other functions in-house might not save any money but stressed that it would improve the quality and consistency of coding, which is essential for collecting reimbursements.

The new supply chain management contract, by contrast, is expected to save $2-3 million per year, though it will be expensive in the short term because the old and new systems have to be run simultaneously. A third contract to provide necessary software support to an existing system was roundly criticized: why wasn’t such support included in the original 2011 contract? To which the answer was, “We blew it,” apparently because hardware is in the System’s capital budget and software in its operations budget. The committee instructed Elwell to supply information about both in the future.

As if to emphasize the improved contracting procedures, Elwell recused himself from presenting a contract with HMA, for which he previously worked, though he’d had no part in negotiating the agreement. CEO Dr. Jay Shannon presented instead, noting that under Procurement’s scoring system for quality, HMA had 20% more points than its closest competitor, and that the scoring system was proctored by Procurement officers not involved in awarding the initial score. All standard business practice, but revolutionary at CCHHS.

The Committee then reviewed balance sheets, noting that the system “has a small profit once the County subsidy is figured in,” though at $9.7 million in a multi-billion dollar budget the profit is little more than “a rounding error.” The meeting’s financials appear at www.cookcountyhhs.org/wp-content/uploads/2014/11/02-20-15-Finance-scan-Minutes.pdf.

Highlighted financial data, though the year doesn’t close til March 1:

• Collections take an average of 37 days vs. 58 days in 2011.
• Very briefly the System had 93 days’ worth of cash on hand, versus a recommended 100 days; it’s since slipped back into the 80s but is still better than in 2012 or 2013.
• The Unrestricted Fund Balance (cash, versus assets in Restricted Fund Balance) is starting to rebound: it went from $168 million in 2011 down to $95 million in 2012 and $36 million in 2013, but improved to $88 million last year.
• Procurement goals for the year are less outside staffing (adding 130-200 jobs and resolving conflicts with labor), remote hosting of hospital data to improve quality, and lab automation, a possible source of earned revenue from other hospitals. The System will also consider how to improve patient transport and whether to provide on-site dialysis instead of referring those patients to other facilities.
• Overall strategic issues: the size and design of clinics, the central campus redevelopment for which five proposals have been received, and the possibility of risk-sharing with existing managed care groups. One possible partner could bring the System 90,000 patients if the System is willing to assume some of the partner’s risks.

The metrics presented were not, as directors noted, as clear as those presented to the Human Resources Committee, which saw a detailed step-by-step account of the hiring process and progress in reducing how long it takes. (HR attributes much of the delay to the Shakman decree.)

But a few items came through:

• The System gets 40% of the primary care provided under County Care but only 7.6% of the specialty care, when specialty care is where hospitalizations come from. This may be because CCHHS doesn’t provide adequate support services for specialists, e.g. scheduling. Ellwood proposes making specialists available at the System’s Federally Qualified Health Centers (clinics) to connect patients long-term to those specialists.
• The System’s fixed costs are high enough that extra patients cost very little.
• Because the proposed Rauner Medicaid cuts are to special payments the System rarely receives, those cuts won’t hurt the System directly; but the cuts to the County’s revenue from the state could be devastating.

Steven Glass, the director of Managed Care, then explained the complicated process of redetermining whether individuals qualify for Medicaid. 50% of Medicaid patients must be in coordinated care under the Affordable Care Act, so it’s essential to make sure they still qualify. They’re automatically re-enrolled every year but on a different timetable they must demonstrate that they’re still poor, and the whole thing is a 4-month process. Of the patients the System loses, 60% of them fail to go through the necessary I’m-still-poor process, despite assists from the Illinois Medicaid Redetermination Project and new cooperative efforts with the state’s Department of Children and Family Services and the city’s Department of Human Services. The System informs people about the Medicaid requirements, putting messages on every prescription and discharge notice and giving Primary Care docs data on who hasn’t re-upped so they can follow up with their own patients. Unfortunately, CCHHS isn’t allow to sign up uninsured people in the Emergency Room and then get paid for those emergency services.

To reduce the System’s dependence on Medicaid patients subject to these complex requirements, Glass talked about the important of risk-sharing with Primary Care Physician networks: if we share risk with them, they make us their designated provider of, e.g., liver scans. The System has the city’s most advanced scanner which makes it possible to avoid biopsies–“every hospital should be referring cases to us for scanning.”

Patient metrics:

• Membership increased 11% in January, to 96,000, less than budgeted because signup started late; Glass says he expects to catch up to budget later.
• “We were down in capitation [number of members] but captured most available Medicaid fee-for-service.”
• CCHHS is the third-largest health plan in the county.
• It’s not clear the System is getting its fair share of new ACA enrollees: 275,000 at one point of which we got zero? Are they all in the suburbs?
• The System’s membership growth is among the older population which is more expensive to care for–we keep those patients and lose the younger ones.

Submitted by Kelly Kleiman